The classical voltage-gated potassium ion channel in squid giant axons has been localized using an affinity purified polyclonal antibody. Widely dispersed spots of intense immunofluorescence were observed throughout the axonal membrane: ~1 per 25 square microns of membrane surface area. We also observed punctate immunofluorescence in the axoplasm which was localized to a ~25 micron wide column down the length of the nerve (axon diameter ~500 microns). Immuno-electron microscopy revealed potassium ion channel containing transport vesicles ~20-30 nm in diameter in linear arrays within this column. Transport vesicles were isolated from axoplasm using novel techniques described in previous annual reports. Approximately 1% of all such vesicles contained a potassium ion channel. These preparations lacked synaptobrevin, the classical v-snare of synaptic vesicles. Synaptobrevin was observed in another axoplasm fraction. Incorporation of transport vesicles into artificial lipid bilayers revealed potassium ion channel activity similar to that recorded directly from the axonal membrane. Transport vesicles may be involved in recycling of axonal proteins (potassium ion channels and other proteins) via constituitive fusion. We also have isolated another axoplasm fraction containing larger vesicles (d ~ 150 nm) - possibly endocytotic in origin - which may take potassium ion channels back to the cell body.